Q. Consider the following:

  1. Areca nut
  2. Barley
  3. Coffee
  4. Finger millet
  5. Groundnut
  6. Sesamum
  7. Turmeric

The Cabinet Committee on Economic Affairs has announced the Minimum Support Price for which of the above?

(a) 1, 2, 3 and 7 only
(b) 2, 4, 5 and 6 only
(c) 1, 3, 4, 5 and 6 only
(d) 1, 2, 3, 4, 5, 6 and 7

Answer: (b) 2, 4, 5 and 6 only

Notes:
  • Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
  • The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
  • MSP is price fixed by Government of India to protect the producer – farmers – against excessive fall in price during bumper production years. The minimum support prices are a guarantee price for their produce from the Government.
  • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution. In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
  • The Commission for Agricultural Costs and Prices (CACP) decides the minimum support price taking into account the following factors:
    • The entire structure of the economy of a particular commodity or group of commodities
    • Cost of production
    • Changes in input prices
    • Input-output price parity
    • Trends in market prices
    • Demand and supply
    • Inter-crop price parity
    • Effect on industrial cost structure
    • Effect on the cost of living
    • Effect on the general price level
    • International price situation
    • Parity between prices paid and prices received by the farmers
    • Effect on issue prices and implications for subsidy
  • Government announces minimum support prices (MSPs) for 22 mandated crops and fair and remunerative price (FRP) for sugarcane. The mandated crops are 14 crops of the kharif season, 6 rabi crops and two other commercial crops. In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively.
  • The list of crops are as follows.
    • Cereals (7) – paddy, wheat, barley, jowar, bajra, maize and ragi
    • Pulses (5) – gram, arhar/tur, moong, urad and lentil
    • Oilseeds (8) – groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed
    • Raw cotton
    • Raw jute
    • Copra
    • De-husked coconut
    • Sugarcane (Fair and remunerative price)
    • Virginia flu cured (VFC) tobacco.
  • Food grains offered by farmers within the stipulated period & conforming to the specifications prescribed by Government are purchased at MSP by the State Government agencies and FCI for Central Pool.
  • Oilseeds, pulses and copra of Fair Average Quality (FAQ) are procured from registered farmers under Price Support Scheme under Umbrella Scheme of PM-AASHA, as per its guidelines at MSP in consultation with the concerned State Governments, when market price of these produce fall below the MSP.
  • Cotton and Jute are procured by Government at MSP through Cotton Corporation of India (CCI) and Jute Corporation of India (JCI), respectively.
PM AASHA Scheme
  • Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM AASHA) is a scheme that aims at ensuring fair price for farmers and their produce.
  • By strengthening the procurement process, the PM-AASHA scheme will improve the income of the farmers to a greater extent.
  • Components of PM-AASHA:
    • Price Support Scheme (PSS)
      • Under the PSS, Central nodal agencies will procure pulses, oilseeds and copra with proactive role of state governments.
      • The Food corporation of India (FCI) and the National Agricultural Cooperative Marketing Federation of India (NAFED) will help implement the scheme.
      • The procurement expenditure and losses due to procurement will be borne by Central Government as per norms.
      • The government will procure 25% of the marketable surplus of farmers for eligible crops.
      • The Centre has made a provision of about Rs 16,000 crores to be provided as bank guarantee for the agencies to procure from farmers.
    • Price Deficiency Payment Scheme (PDPS)
      • Under the PDPS, the state will provide the difference between the prices prevailing in mandis and the MSP.
      • All oil-seeds are to be covered under PDPS.
      • This scheme is modelled on the Bhawantar Bhugtan Yojana that has been implemented by the Madhya Pradesh state government as well as Bhavantar Bharpai Yojana of Haryana Government.
      • There will be no physical procurement of crops.
    • Pilot of Private Procurement & Stockist Scheme (PPPS)
      • In lieu of PSS and PDPS, in certain pilot districts the PPPS will be tried out.
      • Private agencies will procure oilseeds in coordination with the government.
      • The selected private agency shall procure the commodity at MSP in the notified markets during the notified period from the registered farmers in consonance with the PPSS Guidelines, whenever the prices in the market fall below the notified MSP and whenever authorized by the state/UT government.

Q. With reference to the governance of public sector banking in India, consider the following statements:

  1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
  2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (b) 2 only

Notes:
  • Public Sector Banks or PSBs are those banks where the direct holding of the Central/State Government or other PSBs is 51% or more.
  • Capital infusion into public sector banks by the Government of India has not steadily increased in the last decade, there has been a fall in between.
  • To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.
    • Merging of banks would help in strengthening the bargaining power of the banks, reduce operational expenditure, enhance capital efficiency, streamline banking operations and reduce their NPA burden.
  • The central government invested Rs 3.31 lakh crore in public sector banks between FY17 and FY21.
  • As of December 31, 2022, all PSBs have more than a 100 basis point cushion above the regulatory Tier I capital requirement. It is 10.8% for SBI, 12.6% for Bank of Baroda, 13.7% for Canara Bank, 11.6% for UCO Bank, 12.3% for Union Bank, and 13.5% for Bank of Maharashtra, and 13.6 per cent for Bank of India.
  • After major mergers, these are the 12 public sector banks in 2024.
    1. State Bank of India
    2. Punjab National Bank
    3. Bank of Baroda
    4. Canara Bank
    5. Union Bank of India
    6. Bank of India
    7. Indian Bank
    8. Central Bank of India
    9. Indian Overseas Bank
    10. UCO Bank
    11. Bank of Maharashtra
    12. Punjab & Sindh Bank
Capital infusion into public sector banks

Q. Consider the following items:

  1. Cereal grains hulled
  2. Chicken eggs cooked
  3. Fish processed and canned
  4. Newspapers containing advertising material

Which of the above items is/are exempted under GST (Good and Services Tax)?

(a) 1 only
(b) 2 and 3 only
(c) 1, 2 and 4 only
(d) 1, 2, 3 and 4

Answer: (c) 1, 2 and 4 only

Notes:
  • GST exemptions are specific goods or services that are exempt from the application of GST.
  • There are three types of GST exemptions available in India.
    • Absolute: Absolute exemptions are those exemptions that are provided on the full amount and do not come with any conditions or restrictions, whatsoever. A good example is the exemption on the services of RBI.
    • Conditional: Conditional exemptions are those exemptions that have a certain limit, condition, or restriction on the nature and extent of the exemption. For example, hotel services are exempt up to a certain extent and not exempt fully.
    • Partial: Unregistered people who supply goods within the state to a registered person are exempt from GST under reverse charge only if the aggregate value of supply is not more than Rs.5000 per day.
  • Previously GST council imposed a 5% rate of GST on hulled grains. However, later on 11th June 2017, the rate of GST applicable on hulled grains is 0% (nil rate) fixed by GST council at the introduction of GST in July 2017 is 0%
  • Cereal grains hulled falls under GST HSN code chapter 1104.
  • Cooked eggs is exempted from paying GST, the rate of GST payable on cooked eggs is nil rate.
  • Fish, crustaceans, molluscs & other aquatic invertebrates in processed, cured or frozen state are taxable at 5% rate under GST.
  • Newspapers containing advertising material has 0% GST rate.
    • However, ads attract 5% GST, not the newspapers publishing them. 
  • Newspapers with or without advertisements are exempted from GST.
List of GST Exemption on Goods
Types of goodsExamples
Live animalsAsses, cows, sheep, goats, poultry, etc.
MeatFresh and frozen meat of sheep, cows, goats, pigs, horses, etc.
FishFresh or frozen fish
Natural productsHoney, fresh and pasteurized milk, cheese, eggs, etc.
Live trees and plantsBulbs, roots, flowers, foliage, etc.
VegetablesTomatoes, potatoes, onions, etc.
FruitsBananas, grapes, apples, etc.
Dry fruitsCashew nuts, walnuts, etc.
Tea, coffee and spicesCoffee beans, tea leaves, turmeric, ginger, etc.
GrainsWheat, rice, oats, barley, etc.
Products of the milling industryFlours of different types
SeedsFlower seeds, oil seeds, cereal husks, etc.
SugarSugar, jaggery, etc.
WaterMineral water, tender coconut water, etc.
Baked goodsBread, pizza base, puffed rice, etc.
Fossil fuelsElectrical energy
Drugs and pharmaceuticalsHuman blood, contraceptives, etc.
FertilizersGoods and organic manure
Beauty productsBindi, kajal, kumkum, etc.
WasteSewage sludge, municipal waste, etc.
OrnamentsPlastic and glass bangles, etc.
NewsprintJudicial stamp paper, envelopes, rupee notes, etc.
Printed itemsPrinted books, newspapers, maps, etc.
FabricsRaw silk, silkworm cocoon, khadi, etc.
Hand toolsSpade, hammer, etc.
PotteryEarthen pots, clay lamps, etc.
List of GST Exemption on Services
Types of servicesExamples
Agricultural servicesCultivation, supplying farm labor, harvesting, warehouse-related activities, renting or leading agricultural machinery, services provided by a commission agent or the Agricultural Produce Marketing Committee or Board for buying or selling agriculture produce, etc.
Government servicesPostal service, transportation of people or goods, services by a foreign diplomat in India, services offered by the Reserve Bank of India, services offered to diplomats, etc.
Transportation servicesTransportation of goods by road, rail, water, etc., payment of toll, transportation of passengers by air, transportation of goods where the cost of transport is less than INR 1500, etc.
Judicial servicesServices offered by the arbitral tribunal, partnership firm of advocates, senior advocates to an individual or business entity whose aggregate turnover is up to INR 40 lakhs
Educational servicesTransportation of faculty or students, mid-day meal scheme, examination services, services offered by IIMs, etc.
Medical servicesServices offered by ambulances, charities, veterinary doctors, medical professionals, etc. does not include hair transplant or cosmetic or plastic surgery.
Organizational servicesServices offered by exhibition organizers for international business exhibitions, tour operators for foreign tourists, etc.
Other servicesServices offered by GSTN to the Central or State Government or Union Territories, admission fee payable to theatres, circuses, sports events, etc. which charge a fee up to INR 250

Q. Consider the following countries:

  1. Australia
  2. Canada
  3. China
  4. India
  5. Japan
  6. USA

Which of the above are among the ‘free-trade partners’ of ASEAN?

(a) 1, 2, 4 and 5
(b) 3, 4, 5 and 6
(c) 1, 3, 4 and 5
(d) 2, 3, 4 and 6

Answer: (c) 1, 3, 4 and 5

Notes:
  • ASEAN, officially an abbreviation of the Association of Southeast Asian Nations, is a political and economic union of 10 member states in Southeast Asia.
  • The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Fathers of ASEAN: Indonesia, Malaysia, Philippines, Singapore and Thailand.
    • Brunei Darussalam joined ASEAN on 7 January 1984, followed by Viet Nam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999, making up what is today the ten Member States of ASEAN.
  • ASEAN has five free trade agreements (FTAs) with six Dialogue Partners, namely China, Japan, Republic of Korea, India, and Australia and New Zealand.
ASEAN

Read more: ASEAN

Q. Which of the following is/are the aim/aims of “Digital India” Plan of the Government of India?

  1. Formation of India’s own Internet companies like China did.
  2. Establish a policy framework to encourage overseas multinational corporations that collect Big Data to build their large data centres within our national geographical boundaries.
  3. Connect many of our villages to the Internet and bring Wi-Fi to many of our schools, public places and major tourist centres.

Select the correct answer using the code given below:

(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer: (b) 3 only

Notes:
  • The Indian Government launched the Digital India campaign to make government services available to citizens electronically by online infrastructure improvement and also by enhancing internet connectivity.
  • Digital India was an initiative taken by the Government of India for providing high-speed internet networks to rural areas.
  • It also aims to empower the country digitally in the domain of technology. Digital India Mission was launched by PM Narendra Modi on 1st July 2015 as a beneficiary to other government schemes including Make in India, Bharatmala, Sagarmala, Startup India, BharatNet, and Standup India.
  • Digital India Mission is mainly focused on three areas:
    • Providing digital infrastructure as a source of utility to every citizen.
    • Governance and services on demand.
    • To look after the digital empowerment of every citizen.
  • The major objectives of this initiative are listed below:
    • To provide high-speed internet in all gram panchayats.
    • To provide easy access to Common Service Centre (CSC) in all the locality.
    • Digital India is an initiative that combines a large number of ideas and thoughts into a single, comprehensive vision so that each of them is seen as part of a larger goal.
    • The Digital India Programme also focuses on restructuring many existing schemes that can be implemented in a synchronized manner.

Q. With reference to Pradhan Mantri Kaushal Vikas Yojana, consider the following statements:

  1. It is the flagship scheme of the Ministry of Labour and Employment.
  2. It, among other things will also impart training in soft skills, entrepreneurship, financial and digital literacy.
  3. It aims to align the competencies of the unregulated workforce of the country to the National Skill Qualification Framework.

Which of the statements given above is/are correct?

(a) 1 and 3 only
(b) 2 only
(c) 2 and 3 only
(d) 1, 2, and 3

Answer: (c) 2 and 3 only

PMKVY:
  • Skill India Mission was launched by the government in 2015 under which the flagship scheme Pradhan Mantri Kaushal Vikas Yojana (PMKVY) is run.
  • It aims to train over 40 crore people in India in different skills by 2022. It aims at vocational training and certification of Indian youth for a better livelihood and respect in the society.
  • PMKVY is implemented by the National Skills Development Corporation (NSDC) under the guidance of the Ministry of Skill Development and Entrepreneurship (MSDE).
  • Under PMKVY, training and assessment fees are paid completely by the Government.
  • Funding: The scheme is being implemented at the Centre and the State level with a 50:50 allocation of funds and targets with more enhanced involvement of District Skill Committees (DSC).
  • Key Components:
    • Short Term Training: STT component imparted at PMKVY Training Centres (TC) is expected to benefit candidates of Indian nationality who are either school/college dropouts or unemployed.
    • Recognition of Prior Learning (RPL): It is a skill certification component to enable Indian youth to take on industry-relevant skill certification which will help them to secure a better livelihood.
      • Individuals with prior learning experience or skills can register themselves and get assessed and certified under the RPL component of PMKVY.
      • It focuses mainly on individuals engaged in unregulated sectors.
Skill India Mission:
  • Skill India Mission is an initiative of the Government of India, launched by the Prime Minister on the 16th of July 2015 with an aim to train over 40 crore people in India in different skills by 2022.
  • It includes various initiatives of the government like
    • National Skill Development Mission,
    • National Policy for Skill Development and Entrepreneurship, 2015,
    • Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
    • Skill Loan scheme.

Q. The Partnership for Action on Green Economy (PAGE), a UN mechanism to assist countries transition towards greener and more inclusive economies, emerged at

(a) The Earth Summit on Sustainable Development 2002, Johannesburg.

(b) The United Nations Conference on Sustainable Development 2012, Rio de Janeiro.

(c) The United Nations Framework Convention on Climate Change 2015, Paris.

(d) The World Sustainable Development Summit 2016, New Delhi.

Answer: (b) The United Nations Conference on Sustainable Development 2012, Rio de Janeiro.

Notes:
  • The Partnership for Action on Green Economy (PAGE), a United Nations mechanism to assist countries in transition towards greener and more inclusive economies emerged at The United Nations Conference on Sustainable Development 2012, Rio de Janeiro.
  • PAGE seeks to put sustainability at the heart of economic policies and practices to advance the 2030 Agenda for Sustainable Development.
  • PAGE brings together five UN agencies which are the UN Environment, International Labour Organization, UN Development Programme, UN Industrial Development Organization, and UN Institute for Training and Research.
PAGE

Q. Which one of the following statements correctly describes the meaning of legal tender money?

(a) The money which is tendered in courts of law to defray the fee of legal cases

(b) The money which a creditor is under compulsion to accept in settlement of his claims

(c) The bank money in the form of cheques, drafts, bills of exchange, etc.

(d) The metallic money in circulation in a country

Answer: (b) The money which a creditor is under compulsion to accept in settlement of his claims

Legal Tender:
  • It is a type of currency or medium of exchange. 
  • Legal tender is any official medium of payment recognized by law that can be used to extinguish a public or private debt, or meet a financial obligation.
  • The national currency is legal tender in practically every country.
  • A creditor is obligated to accept legal tender toward repayment of a debt.
  • Legal tender is constitutioned by a law that specifies the object to be utilised as legal tender and the organisation that is commissioned to create and issue the same to the public such as the Reserve Bank of India.
  • In India, the authentic legal tender of the Reserve Bank of India consists of coins and notes. The creditors are supposed to accept them as a payment towards the debt.
  • Banknotes and coins are two types of legal tender money in India. Every banknote issued by Reserve Bank of India (₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹2000), unless withdrawn from circulation, shall be legal tender at any place in India.
    • As per Section 6 of The Coinage Act, 2011, the Government of India issued coins is a legal tender in India.
Fiat Money
  • Fiat money is a currency that lacks intrinsic value and is established as a legal tender by government regulation.
    • Traditionally, currencies were backed by physical commodities such as silver and gold, but fiat money is based on the creditworthiness of the issuing government.
  • The value of fiat money depends on supply and demand and was introduced as an alternative to commodity money and representative money.
    • Commodity money is created from precious metals such as gold and silver, while representative money represents a claim on a commodity that can be redeemed.

Q. If a commodity is provided free to the public by the Government, then

(a) the opportunity cost is zero.

(b) the opportunity cost is ignored.

(c) the opportunity cost is transferred from the consumers of the product to the tax-paying public.

(d) the opportunity cost is transferred from the consumers of the product to the Government.

Answer: (c) the opportunity cost is transferred from the consumers of the product to the tax-paying public.

Notes:
  • Opportunity cost is what a business owner misses out on when selecting one option over another.
  • Opportunity cost represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.
    • If a commodity is provided free to the public by the Government, then the opportunity cost is transferred from the consumers of the product to the tax-paying public.
    • As per microeconomics, the opportunity cost is zero for free goods such as air and common goods such as fish/grazing land.
    • For public goods such as street lights and defense, the opportunity cost is involved (The government could have spent that much money on street lights rather than on the military). So, the opportunity cost is not zero.
  • Opportunity costs can be viewed as a trade off. Trade offs happen in decision making when one option is chosen over another option. Opportunity costs sums up the total cost for that trade off.
    • For example, a certain kind of bamboo can be used to produce both paper and furniture. If the business takes a decision to consider using bamboo for furniture, then the society has to forego the number of bamboos that could have been used for manufacturing paper.
    • Here, the opportunity cost of producing furniture is the number of papers that are foregone.

Q. Increase in absolute and per capita real GNP do not connote a higher level of economic development, if

(a) industrial output fails to keep pace with agricultural output.

(b) agricultural output fails to keep pace with industrial output.

(c) poverty and unemployment increase.

(d) imports grow faster than exports.

Answer: (c) poverty and unemployment increase.

Notes:
  • Increasing poverty and unemployment reflect that the fruits of growth in Real GNP have not adequately spread to all. While economic growth is happening for the nation in general a section of people is left behind hence a higher level of economic development is not taking place in the country.
  • Economic development includes not only economic growth but also various other economic changes that improve the quality of life or standard of living of people in a country.
    • If with economic growth, a country experiences various economic changes such as reduction in poverty and unemployment, reduction in income and wealth inequality, increase in literacy rate, improvement in health and hygiene, etc, that improve the quality of life then that is economic development.
Gross National Product (GNP)
  • Gross national product (GNP) refers to the total value of all the goods and services produced by the residents and businesses of a country, irrespective of the location of production.
  • GNP takes into account the investments made by the businesses and residents of the country, living both inside and outside the country. It also takes into account the value of the products produced by the industries of the domestic origin.
  • GNP does not take into consideration the incomes earned by the foreign nationals in the country or any products produced by a foreign company in the manufacturing units in the country.
  • GNP is the GDP of a country added to its income earned from abroad. 
    • While calculating GNP transboundary activities of an economy are also taken into account.
    • GNP = GDP + Income from abroad

Q. Consider the following statements:

Human capital formation as a concept is better explained in terms of a process which enables

  1. Individuals of a country to accumulate more capital.
  2. Increasing the knowledge, skill levels and capacities of the people of the country.
  3. Accumulation of tangible wealth.
  4. Accumulation of intangible wealth

Which of the statements given above is/are correct?

(a) 1 and 2
(b) 2 only
(c) 2 and 4
(d) 1, 3 and 4

Answer: (c) 2 and 4

Notes:
  • According to the OECD, human capital is defined as: “the knowledge, skills, competencies and other attributes embodied in individuals or groups of individuals acquired during their life and used to produce goods, services or ideas in market circumstances”. 
  • Human capital formation refers to the process of adding to the stock of human capital over time. It is the process of acquiring and increasing the number of skilled and experienced people. It is essential for the development of an economy.
  • Intangible wealth of a nation comprises of the skilled population, human resource base, culture, arts etc.
  • Human capital formation is the outcome of investments in education, health, on-the-job training, migration and information.
  • As per RBI, Gross capital formation refers to the ‘aggregate of gross additions to fixed assets (that is fixed capital formation) plus change in stocks during the counting period.
    • Tangible capital is also GCF is it involves largely infrastructural components.

Q. Despite being a high saving economy, capital formation may not result in significant increase in output due to

(a) weak administrative machinery

(b) illiteracy

(c) high population density

(d) high capital-output ratio

Answer: (d) high capital-output ratio

Notes:
  • The capital-output ratio is the amount of capital needed to produce one unit of output.
  • It is the relationship between the level of investment made in the economy and the consequent increase in Gross Domestic Product (GDP).
  • It also expresses the relationship between the value of capital invested and the value of output.
  • High Capital-Output ratio means that more capital is needed to produce one unit of output due to which the increased capital formation may not result in significant increase in output.
Incremental Capital Output Ratio (ICOR)
  • It is a variant of the Capital Output Ratio.
  • The ICOR indicates an additional unit of capital or investment needed to produce an additional unit of output.
  • The utility of ICOR i0s that with a rise in investment, the capital-output ratio itself may change, and hence the usual capital-output ratio will not be useful.
Lower Capital Output Ratio (LCOR)
  • A lower capital-output ratio shows the productivity of capital and technological progress.
  • A lower capital-output ratio indicates that a lower level of investment is required to produce a given growth rate in the economy. This is considered to be a desirable situation.
  • A lower capital-output ratio also shows that capital is very productive or efficient.

How can the efficiency of capital be achieved?

  • It is possible mainly through technological progress. With superior technology, the capital will be efficient to produce more output and the capital-output ratio will be lower.

Q. Consider the following statements:

  1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
  2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
  3. Treasury bills offer are issued at a discount from the par value.

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer: (c) 2 and 3 only

Notes:
  • Government security (G-Sec) is a tradeable instrument issued by the central government or state governments. It acknowledges the government’s debt obligations.
  • A G-Sec is a type of debt instrument issued by the government to borrow money from the public to finance its Fiscal Deficit.
    • A debt instrument is a financial instrument that represents a contractual obligation by the issuer to pay the holder a fixed amount of money, known as the principal or face value, on a specified date.
  • The G-Secs issuances are managed by the RBI, who on behalf of the Centre, regularly conducts G-Sec auctions every Friday.
    • State Government transactions are carried out by RBI in terms of the agreement entered into with the State Governments.
  • Such securities are short-term (usually called treasury bills, with original maturities of less than one year- presently issued in three tenors, namely, 91-day, 182 day and 364 day) or long-term (usually called Government bonds or dated securities with an original maturity of one year or more).
  • In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Government issue only bonds or dated securities, which are called the State Development Loans (SDLs).
  • G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
    • Gilt-edged securities are high-grade investment bonds offered by governments and large corporations as a means of borrowing funds.
  • The RBI conducts (Open Market Operations) OMOs for sale or purchase of G-secs to adjust money supply conditions.
    • The RBI sells g-secs to remove liquidity from the system and buys back g-secs to infuse liquidity into the system.
Treasury bills:
  • They are short-term debt instruments issued by the Central government. 
    • State Government don’t issue treasury bills.
    • Treasury bills were first issued in India in 1917. They are issued via auctions conducted by the Reserve Bank of India (RBI) at regular intervals.
  • T-Bills are money market instruments.
  • Treasury bills play a vital role in cash management of the Government.
  • Being risk-free, their yields at varied maturities serve as short term benchmarks and help pricing varied floating-rate products in the market.
  • Tenure: These are presently issued in three tenors, namely, 91 day, 182 day and 364 day.
  • Treasury bills are issued at a discount and redeemed at the face value at maturity.
  • Individuals, trusts, institutions and banks can purchase T-Bills. But they are usually held by financial institutions.
  • Banks give treasury bills to the RBI to get money under repo. Similarly, they can also keep it to fulfil their Statutory Liquid Ratio (SLR) requirements.

Q. Consider the following statements:

  1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.
  2. CAR is decided by each individual bank.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (a) 1 only

Capital Adequacy Ratio (CAR):
  • Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital to its risk. It is also known as the Capital to Risk (Weighted) Assets Ratio (CRAR).
    • In other words, it is the ratio of a bank’s capital to its risk-weighted assets and current liabilities. This ratio is utilized to secure depositors and boost the efficiency and stability of financial systems all over the world.
  • It is measured as: Capital Adequacy Ratio = (Tier I + Tier II + Tier III (Capital funds)) /Risk weighted assets
    • The risk weighted assets take into account credit risk, market risk and operational risk.
  • It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
  • Criteria:
    • The Basel III norms stipulated a capital to risk weighted assets of 8%.
    • However, as per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%.
  • Tier 1 capital: This can absorb the losses without a bank being required to stop trading. Also called core capital, this consists of ordinary share capital, equity capital, audited revenue reserves, and intangible assets. This is permanently available capital and readily available to absorb losses incurred by a bank without it having to cease operations.
  • Tier 2 capital: This can absorb losses if the bank is winding-up and so gives depositors a lesser measure of protection. This consists of unaudited reserves, unaudited retained earnings, and general loss reserves. This capital cushions losses if the bank is winding up and is used to absorb losses after a bank loses all its tier 1 capital.
  • Risk-weighted assets: These assets are used to fix the least amount of capital that should be possessed by banks to lower the insolvency risk. The capital requirement for all types of bank assets depends on the risk assessment.

Q. Consider the following statements:

  1. The Food Safety and Standards Act, 2006 replaced the Prevention of Food Adulteration Act, 1954.
  2. The Food Safety and Standards Authority of India (FSSAI) is under the charge of Director General of Health Services in the Union Ministry of Health and Family Welfare.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (a) 1 only

Food Safety and Standards Authority of India (FSSAI):
  • Food Safety and Standards Authority of India (FSSAI) is an autonomous body under the Ministry of Health and Family Welfare, GoI.
  • It has been established under Food Safety and Standards Act, 2006 which consolidates various acts and orders that have hitherto handled food related issues in various Ministries and Departments.
  • The FSSAI has its headquarters at New Delhi. The authority also has 6 regional offices located in Delhi, Guwahati, Mumbai, Kolkata, Cochin, and Chennai.
  • The Food Standards and Safety Act, 2006 replaced several Acts and Orders like the Prevention of Food Adulteration Act, 1954; Fruit Products Order, 1955; etc.
  • FSSAI is headed by a non-executive Chairperson, appointed by the Central Government, either holding or have held a position not below the rank of Secretary to the GoI.
    • It is not under the charge of Director General of Health Services.
  • FSSAI has been created for laying down science-based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import to human consumption.
Composition of FSSAI
  • If we talk about the composition of board members leading the organisation from the front, the structure of the Food Safety and Standards Authority of India comprises:
    • Chairman – Appointed by the Central Government
    • 22 other members, of which one-third must be women
  • Apart from this, a strong team of scientists and researchers for the testing of food quality. Separate committees and panels are also formed with experts from scientific backgrounds.
Functions of FSSAI
  • Setting Rules and Guidelines – FSSAI sets up rules and guidelines which need to be followed by all food manufacturing companies, keeping into consideration hygiene and food safety
  • Granting License – To pursue any food related business, the owner needs to get a certificate and license with the permission of FSSAI
  • Test the Standard of Food – the standard and quality of food manufactured by all companies registered under FSSAI, is done by the organisation themselves
  • Regular Audits – Proper inspection is done for food-producing and manufacturing companies to ensure the standards are at par with the guidelines
  • Spreading Food Safety Awareness – It is the responsibility of FSSAI to spread awareness and inform the citizens about the importance of safe and hygienic food consumption
  • Maintain Records and Data – FSSAI also has the responsibility to maintain proper records and data of all the registered organisations. Any violation of rules prescribed by FSSAI can lead to the termination of the license
  • Keeping the Government Updated – Any food safety-related threat must be informed to the Government authorities for further action. Also, assist them in framing food standard policies
Important Initiatives by FSSAI
  • Eat Right India – The aim is not just to provide food to one and all, but to provide quality food to everyone. With this initiative, FSSAI intends to make good quality food accessible to every citizen of the country.
  • Clean Street Food – This involves training the street food vendors and making them aware of the violations as per the FSS Act 2006. This will also help in the social and economic upliftment of street food vendors.
  • Diet4Life – This is another initiative taken by FSSAI, to spread awareness about metabolic disorders.
  • Save Food, Share Food, Share Joy – Encouraging people to avoid food wastage and promote food donation. Through this, FSSAI intends to connect food-collecting agencies with the food-producing companies and share the food with the ones in need.

Q. With reference to the provisions made under the National Food Security Act, 2013, consider the following statements:

  1. The families coming under the category of ‘below poverty line (BPL)’ only are eligible to receive subsidised food grains.
  2. The eldest woman in a household, of age 18 years or above, shall be the head of the household for the purpose of issuance of a ration card.
  3. Pregnant women and lactating mothers are entitled to a ‘take-home ration’ of 1600 calories per day during pregnancy and for six months thereafter.

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 3 only

Answer: (b) 2 only

National Food Security Act (NFSA), 2013
  • The government has notified the National Food Security Act, 2013 on 10th September 2013.
  • The objective is to provide for food and nutritional security in the human life cycle approach, by ensuring access to adequate quantities of quality food at affordable prices to people to live a life with dignity.
  • Some of the provisions of the National Food Security Act, 2013 are as follows:
    • The Act provides for coverage of up to 75% of the rural population and up to 50% of the urban population for receiving subsidized foodgrains under Targeted Public Distribution System (TPDS), thus covering about two-thirds of the population.
    • It provides that the eldest woman of the household of age 18 years or above is to be the head of the household for the purpose of issuing ration cards.
    • 5 Kgs of foodgrains per person per month at Rs. 3/2/1 per Kg for rice/wheat/coarse grains.
    • The existing AAY household will continue to receive 35 Kgs of foodgrains per household per month.
    • Besides meals to pregnant women and lactating mothers during pregnancy and six months after childbirth, such women will also be entitled to receive maternity benefit of not less than Rs. 6,000.
    • The nutritional and feeding norms for supplementary nutrition are 500 calories and 12-15 grams of protein of children between the ages of 6 months to 6 years, 600 calories and 18-20 grams of protein to pregnant and nursing mothers and 800 calories and 20-25 gm. of protein to malnourished children.
    • Meals for children upto 14 years of age.
    • Village Committees will be established to keep a check on the progress and activities and to enable transparency.
    • A person is entitled to a ‘food security allowance’ in the case where the required food supplies were not handed over.

Q. With reference to digital payments, consider the following statements:

  1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account.
  2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (a) 1 only

Notes:
  • Bharat Interface for Money (BHIM) is a UPI enabled initiative to make easy and quick payment transactions.
  • It is an Indian mobile payment App developed by the National Payments Corporation of India (NPCI).
  • Pioneered and developed by National Payments Corporation of India (NPCI), BHIM has been conceived and launched by the Hon’ble Prime Minister of India, Narendra Modi on 30th December 2016 to bring in Financial Inclusion to the nation and a digitally empowered society.
  • Chip pin debit card does not have four factor authorization while BHIM app has three factor authentication.
RuPay Card Scheme
  • RuPay is the first-of-its-kind domestic Debit and Credit Card payment network of India.
  • The name, derived from the words ‘Rupee and ‘Payment’, emphasises that it is India’s very own initiative for Debit and Credit Card payments.
  • The card can also be used for transactions in Singapore, Bhutan, UAE, Bahrain and Saudi Arabia.
National Payments Corporation of India (NPCI)
  • NPCI, an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.
  • It is a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.
  • The Company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment systems.

Q. With reference to India’s decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct?

  1. It is introduced as a part of the Income Tax Act.
  2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.

Select the correct answer using the code given below:

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (d) Neither 1 nor 2

Equalisation Levy:
  • Equalisation Levy is a tax on business transaction for online marketing in which any Indian pays a sum of more than Rs.1 lakh to non-residents entities such Google and Facebook etc.
  • It was first introduced by the Finance Act, 2016. It is aimed at taxing business to business transactions.
    • It is part of the Finance act.
  • Since Equalisation Levy is outside the scope of tax treaties entered into by India with other countries, the foreign company cannot claim a tax credit in its home country.
  • Eligibility:
    • Companies with a turnover of over Rs. 2 crore, will pay this levy on the consideration received for online sales of goods and services.   
  • Purpose:
    • The purpose of the levy is to ensure fair competition, reasonableness and exercise the ability of governments to tax businesses that have a close nexus with the Indian market through their digital operations
  • Applicability of Equalisation Levy:
    • Equalisation Levy is a direct tax, which is withheld at the time of payment by the service recipient. 
    • The two conditions to be met to be liable to equalisation levy:
      • The payment should be made to a non-resident service provider;
      • The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.
  • Services Covered Under Equalisation Levy:
    • Currently, not all services are covered under the ambit of equalisation Levy. 
    • The following services covered:
      • Online advertisement
      • Any provision for digital advertising space or facilities/ service for the purpose of online advertisement
      • As and when any other services are notified will be included with the aforesaid services.

Q. Consider the following statements:

  1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
  2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
  3. As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (c) 1 and 3 only

Debt Profile of the Government
  • India’s public debt profile is relatively stable and is characterised by low currency and interest rate risks.
  • Of the Union Government’s total net liabilities in end-March 2021, 95.1% were denominated in domestic currency, while sovereign external debt constituted 4.9%, implying low currency risk.
    • Further, sovereign external debt is entirely from official sources, which insulates it from volatility in the international capital markets.
  • Furthermore, Public debt in India is primarily contracted at fixed interest rates, with floating internal debt constituting only 1.7% of GDP in end-March 2021. The debt portfolio is, therefore, insulated from interest rate volatility.
  • The General Government debt (including both State and Centre) has steeply declined from about 88 per cent in FY 2020-21 to about 81 per cent in 2022-23.
    • The central government’s debt stood at Rs 155.6 lakh crore or 57.1 per cent of the GDP at the end of March 2023.
      • “The Central Government’s debt has reduced from 61.5 per cent of GDP in 2020-21 to 57.1 per cent of GDP in FY 2022-23.
Fiscal Responsibility and Budget Management Act, 2003
  • The Fiscal Responsibility and Budget Management (FRBM) Bill was introduced in the parliament of India in the year 2000 by the Atal Bihari Vajpayee Government to provide legal backing to the fiscal discipline to be institutionalized in the country. Subsequently, the FRBM Act was passed in the year 2003.
  • It is an act of the parliament that sets targets for the Government of India to establish financial discipline, improve the management of public funds, strengthen fiscal prudence, and reduce its fiscal deficits.
  • The objectives of the act are:
    • Fiscal discipline.
    • Efficient management of expenditure, revenue and debt.
    • Macroeconomic stability.
    • Better coordination between fiscal and monetary policy.
    • Transparency in the fiscal operation of the Government.
  • It set deficit targets for Union and States to control their deficits.
  • The target and parameter changed along with amendments in 2012, 2012, 2015 and 2018.
Fiscal Responsibility and Budget Management Act, 2003
Salient Features
  • Section 4 (1) of the FRBM Act provides that the Central Government shall
    • take measures to limit the fiscal deficit up to 3 per cent of GDP.
    • endeavor to ensure that by the end of Financial Year 2024-25
      • the General Government debt does not exceed 60 per cent of GDP.
      • the Central Government debt does not exceed 40 per cent of GDP.
    • not give additional guarantees with respect to any loan on security of the Consolidated Fund of India in excess of one-half per cent of GDP, in any Financial Year.
    • endeavor to ensure that the fiscal targets are not exceeded after stipulated target dates.
  • Under Section 5 of the Act, except for certain circumstances, the Act does not allow the Central Government to borrow from Reserve Bank of India (RBI).
  • The FM shall review, on half-yearly basis, the trends in receipts and expenditure in relation to the budget and place before both Houses of Parliament the outcome of such reviews.

CAG Audit

  • The 2012 Amendment prescribed for periodical review by the CAG of the compliance of the provisions of FRBM Act by the Government.
FRBM Review Committee headed by NK Singh
  • The government believed the targets set by FRBM Act were too rigid.
  • In 2016, the government set up a committee under NK Singh to review the FRBM Act.
  • The committee recommended that the government should target a fiscal deficit of 3 percent of the GDP in years up to March 31, 2020, cut it to 2.8 per cent in 2020-21 and to 2.5 per cent by 2023.
    • The Committee suggested using debt as the primary target for fiscal policy.
  • Targets set by NK Singh Committee:
    • Debt to GDP ratio: The review committee advocated for a Debt to GDP ratio of 60% to be targeted with a 40% limit for the centre and a 20% limit for the states.
    • Revenue Deficit Target: It should be reduced to 0.8% of GDP by March 31, 2023.
      • The minimum annual reduction target was 0.5% of GDP.
    • Fiscal Deficit Target: It should be reduced to 2.5% of GDP by March 31, 2023.
      • The minimum annual reduction target was 0.3% of GDP.
FRBM Act – Escape Clause
  • The FRBM Act was amended in 2018, adding Specific details that were given in Section 4(2).
  • If the escape clause is triggered, RBI is then allowed to participate directly in the primary auction of government bonds, thus formalising deficit financing.
  • FRBM Act Section 4(2), provides for a trigger mechanism to escape deficit control–related clauses in the act and the Government can over cross the targets in the following situations:
    1. National Security / Act of War
    2. National Calamity
    3. If agriculture output and farm incomes collapse
    4. Fall in real output/GDP growth rate beyond x%
    5. Structural reforms in the economy with unanticipated fiscal implications
  • During the above trigger conditions
    • The government may over cross/deviate from the fiscal deficit target by up to 0.5% of GDP, as recommended by NK Singh’s FRBM Review Committee
    • Individual State Governments may also do similar (e.g. overcross by 0.5% of GSDP), after amending the state FRBM Act accordingly.
  • Finance Minister cited structural reform to escape the FRBM targets for 2019-20 and 2020-21.

Q. Consider the following statements:

  1. The quantity of imported edible oils is more than the domestic production of edible oils in the last five years.
  2. The Government does not impose any customs duty on all the imported edible oils as a special case.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (a) 1 only

Notes:
  • India occupies a prominent position in the world oilseeds industry with a contribution of around 10% in worldwide production.
  • But the demand for edible oils (extracted from oilseeds in addition to palm oil) is significantly higher than the domestic production, leading to dependence on imports (60% of requirement).
  • The government imposes customs duty on edible oils to safeguard the interests of the domestic oil crushing industry.
  • The duty on two major edible oils, namely crude sunflower seed oil and crude canola/ rapeseed/ mustard is 25 percent, while crude soybean oil attracts 30 percent duty.
State of Edible Oil Sector in India
  • Place in Country’s Economy:
    • India is one of the largest producers of oilseeds in the world.
    • Oil sector occupies an important position in the agricultural economy.
    • It accounts for the estimated production of 36.56 mt of nine cultivated oilseeds during the year 2020-21 as per the data released by the Ministry of Agriculture.
    • India is the world’s second-largest consumer and number one importer of vegetable oil.
      • The present rate of edible oil consumption in India surpasses the domestic production rate. Hence, the country has to rely on imports to meet the gap between demand and supply.
      • At present, India meets nearly 55% to 60% of its edible oil demand through imports. Therefore, India needs to be independent in oil production to meet the domestic consumption demand.
      • Palm oil (Crude + Refined) constitutes roughly around 62% of the total edible oils imported and are imported mainly from Indonesia and Malaysia, while Soyabean oil (22%) is imported from Argentina and Brazil and Sunflower oil (15%) is imported mainly from Ukraine and Russia.
  • Types of Oils Commonly Used in India:
    • In India, groundnut, mustard, rapeseed, sesame, safflower, linseed, niger seed and castor are the major traditionally cultivated oilseeds.
    • Soyabean and sunflower have also assumed importance in recent years.
    • Coconut is most important amongst the plantation crops.
    • Among the non-conventional oils, rice bran oil and cottonseed oil are the most important.
  • Export Import Policy on Edible Oils:
    • Import of edible oils is under Open General License (OGL).
    • In order to harmonize the interests of farmers, processors and consumers, Government reviews the duty structure of edible oils from time to time.

Q. Which one of the following links all the ATMs in India?

(a) Indian Banks’ Association

(b) National Securities Depository Limited

(c) National Payments Corporation of India

(d) Reserve Bank of India

Answer: (c) National Payments Corporation of India

National Payments Corporation of India (NPCI):
  • It is an umbrella organisation for operating retail payments and settlement systems in India.
  • It is an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, to create a robust Payment & Settlement Infrastructure in India.
  • It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of the Companies Act 1956 (now Section 8 of the Companies Act 2013).
  • The Company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment.
  • NPCI is promoted by ten major banks, including the State Bank of India, Punjab National Bank, Citibank, Bank of Baroda, and HSBC.
  • The regulatory board of the NPCI, headquartered in Mumbai, includes nominees from the RBI along with nominees from ten core promoter banks. 
  • Payment systems that the NPCI can operate include National Financial Switch (NFS), Immediate Payment System (IMPS), Aadhaar-enabled Payments System (AEPS) and National Automated Clearing House (NACH).
  • Services Offered by NPCI:
    • Bharat Bill Payment Interface (BBPI): It was developed by the NPCI to help the retail payments sector. With the introduction of the BBPI, a single platform has been made for aggregators and 0billpayers. 
    • Immediate Payment Service (IMPS): It gives you the option to transfer funds immediately. The facility is available at any given time. The beneficiary details must be added to transfer funds via IMPS. You can add the IFSC code and the account number to transfer funds via IMPS. 
    • RuPay: NPCI introduced RuPay so that average citizens can make financial decisions. RuPay is an affordable card and can be issued as credit cards, debit cards, and prepaid cards. More than 300 million RuPay cards are in India. 
    • USSD Services: Unstructured Supplementary Service Date (USSD) was introduced by the NPCI to allow individuals to make banking solutions without the need for the internet or smartphones. 
    • BHIM: BHIM uses UPI to complete payment transfers. You can make payments via BHIM by entering the Virtual Payment Address (VPA) or the registered mobile number. No smartphone is required to transfer funds via BHIM. 
    • UPI: United Payments Interface (UPI) allows you to transfer funds from your smartphone. However, you will need to link your bank account to complete payments via UPI. Money is transferred directly from one bank to another.
In India, there are two central depositories, namely.
  1. NSDL (National Security Depository Limited)
  2. CSDL (Central Depository Services Limited)
National Securities Depository Limited
  • National Securities Depository Limited (NSDL) is an Indian central securities depository under the jurisdiction of Ministry of Finance, Government of India based in Mumbai.
    • It is India’s first and largest depository of national securities dealing with issues related to paper-based securities settlement, such as bad delivery and delayed transfer of title, etc.
  • It was established in 1996 as the first electronic securities depository in India with national coverage.
    • The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL.
  • NSDL provides bucket of services to investors, stock brokers, custodians, issuer companies, Saving account current account Business corresponding etc. through its nationwide network of Depository Participants or DPs and digital platforms.
    • It handles most of the securities held and settled in dematerialized form in the Indian capital market.
  • It is a depository of Indian securities that stores digitally securities such as investor bonds, shares and debentures.
  • Industrial Development Bank of India (IDBI), Unit Trust of India (UTI), and National Stock Exchange ( NSE) are promoting NSDL. The NSDL ‘s principal shareholders are listed below.
    • Axis Bank Limited
    • Deutsche Bank
    • HSBC
    • Citibank
    • HDFC Bank
    • Standard Chartered Bank
    • Dena Bank
    • Oriental Bank of Commerce
    • State Bank of India (SBI)
    • Canara Bank
CDSL
  • It is a government-registered share depository, alongside its other state-owned counterpart National Securities Depository Ltd (NSDL).
  • Share depositories hold shares in an electronic or dematerialised form and are an enabler for securities transactions, playing a somewhat similar role to what banks play in handling cash and fixed deposits.
  • CDSL was founded in 1999. It is a Market Infrastructure Institution or MII that is deemed as a crucial part of the capital market structure, providing services to all market participants, including exchanges, clearing corporations, depository participants, issuers and investors.

Q. Consider the following statements:

  1. Aadhaar card can be used as a proof of citizenship or domicile.
  2. Once issued, Aadhaar number cannot be deactivated or omitted by the Issuing Authority.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (d) Neither 1 nor 2

Legal Clarifications on the Use of Aadhaar as an Identity Document
  • Bombay High Court:
    • Bombay High Court in State of Maharashtra vs Unique Identification Authority of India (UIDAI) Case, 2022 clarified the scope and limitations of Aadhaar as an identity document. The Court stated that Aadhaar is only a proof of identity and residence, not of citizenship or date of birth.
  • Supreme Court of India:
    • The Supreme Court of India in the case of Justice K.S. Puttaswamy (Retd.) and Anr. vs Union Of India, 2018 has upheld the constitutional validity of Aadhaar.
      • The Court also clarified that Section 9 of the Aadhaar Act, 2016 states that “The Aadhaar number or the authentication thereof shall not, by itself, confer any right of, or be proof of, citizenship or domicile in respect of an Aadhaar number holder”.
  • Ministry of Electronics and Information Technology (MeitY):
    • MeitY clarified in a 2018 memorandum that Aadhaar is “per se … not a proof of date of birth,” as the date of birth is based on a different document given by Aadhaar applicants.
  • Employees’ Provident Fund Organisation (EPFO):
    • The EPFO which administers the mandatory retirement fund for salaried employees in India.
      • The EPFO issued a circular in January 2024 deleting Aadhaar from the list of documents acceptable as a proof of date of birth.
Aadhaar
  • Aadhaar is a 12 digit individual identification number issued by the Unique Identification Authority of India (UIDAI) on behalf of the Government of India. The number serves as a proof of identity and address, anywhere in India.
  • The Aadhaar programme was launched in 2009 by the UIDAI with the goal of providing a unique and verifiable identity for every resident of India. 
  • It is now mandatory for a number of government services and is also being used by private companies for identification purposes.
  • Aadhaar card, which is a biometric document, stores an individual’s personal information on a government database.
  • An Aadhaar card can be issued to any person residing in the country for more than six months continuously, provided he/she submits one of the 18 listed identity cards and an address proof.
    • Foreign nationals are eligible to obtain one if they have been living in India for half a year.
  • Aadhaar number will help the residents to avail various services provided by banking, mobile phone connections and other Govt and Non-Govt services in due course.
Significant provisions of the Aadhaar Act 2016?
  • The Act has several salient features, including
    • Applicability: Every resident is eligible to receive an Aadhaar number by providing their demographic and biometric information.
    • UIDAI: The Act established the Unique Identification Authority of India (UIDAI) as a statutory authority under the Ministry of Electronics and Information Technology to issue Unique Identification numbers (UID), named “Aadhaar”, to all residents of India. 
    • Unique to everyone: The Aadhaar number assigned to an individual is unique and cannot be given to another person. It is a randomly generated number unrelated to the holder’s attributes or identity.
    • Safety and privacy: UIDAI is responsible for ensuring the safety and privacy of the information it holds by taking necessary measures to protect it.
    • Restricted sharing: The sharing of Aadhaar numbers and related information is restricted and cannot be made public except for specific reasons outlined in regulations.
    • Punishment and fine: Unauthorized access to the Aadhaar database can result in a penalty of imprisonment for up to 3 years and a minimum fine of Rs. 10 lakhs, including revealing any information stored.
    • Cognizance by courts: A court can only take notice of any offense related to the Aadhaar Act after a complaint has been filed by the UID authority or an authorized person by it.
How does UIDAI ensure the safety and security of the Aadhaar?
  • The Unique Identification Authority of India (UIDAI) has implemented a number of measures to ensure the safety and security of Aadhaar data. These include
  • Virtual Aadhaar(Virtual ID)
    • Virtual ID(VID) is a temporary, revocable 16-digit random number mapped with the Aadhaar number. VID can be used in lieu of an Aadhaar number whenever authentication or e-KYC services are performed. 
    • Authentication may be performed using VID in a manner similar to using Aadhaar number. It is not possible to derive Aadhaar number from VID.
  • Masked Aadhaar
    • Mask Aadhaar option allows you to mask your Aadhaar number in your downloaded e-Aadhaar. 
    • Masked Aadhaar number implies replacing of first 8 digits of the Aadhaar number with some characters like “xxxx-xxxx” while only the last 4 digits of the Aadhaar Number are visible.
  • OTP-based authentication
    • OTP (One Time Password) based authentication is an alternative method for verifying an individual’s identity using Aadhaar. 
    • Instead of using the individual’s biometric data or a physical Aadhaar card, OTP-based authentication uses a one-time password that is sent to the individual’s registered mobile number. 
  • Tokenization of Aadhaar
    • UIDAI has introduced tokenization within the Aadhaar authentication system. UID Token is returned as part of every authentication, which is the unique token for that Aadhaar number holder within that agency. 
    • This Token will be unique for each Aadhaar number for a particular entity.